REG - Costain Group PLC - Results for the six months ended 30 June 2024
21/08/2024 07:00
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RNS Number : 1661B Costain Group PLC 21 August 2024
THIS ANNOUNCEMENT CONTAINS INFORMATION WITHIN THE MEANING OF ARTICLE 7 OF THE
MARKET ABUSE REGULATION (EU) 596/2014 AS IT FORMS PART OF UK LAW BY VIRTUE
OF
THE EUROPEAN UNION (WITHDRAWAL) ACT 2018
21 AUGUST 2024
COSTAIN GROUP PLC
("Costain", the "Group", or the "Company")
RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2024 ("H1 24")
Continued strong financial performance, with a £4.3bn forward work position.
· Revenue of £639.3m (H1 23: £664.4m) reflecting growth in Natural
Resources, and as expected, a small reduction in Transportation.
· Adjusted operating profit(1) up 8.7% to £16.3m (H1 23: £15.0m)
reflecting an increased operating margin in Transportation and increasing
volumes and margin in Natural Resources. Reported operating profit was £13.9m
(H1 23: £7.6m).
· On course to meet margin targets of 3.5% and 4.5% during FY 24 and
FY 25 respectively. Adjusted operating margin(1) increase of 20bps to 2.5% (H1
23: 2.3%), with margin growth in both divisions.
· Adjusted EPS up 27.3% to 5.6p (H1 23: 4.4p) driven by interest
earned on stronger net cash position and adjusted operating profit increase.
Reported EPS was 5.0p (H1 23: 1.9p).
· Increased high quality forward work(2) position of £4.3bn of more
than three times FY 23 revenue (FY 23: £3.9bn; H1 23: £4.0bn), with contract
wins across all sectors and significant growth in Water. At least a further
£500m of Water contracts won post half year.
· Interim dividend payment of 0.4p (H1 23: 0.4p), in line with H1 23.
· Strong balance sheet and as separately announced today, a £10m
on-market share buyback launched.
Financial summary
(£m unless otherwise stated) H1 24 H1 23 Change
Revenue 639.3 664.4 (3.8)%
Adjusted operating profit(1) 16.3 15.0 8.7%
Adjusted operating margin(1) 2.5% 2.3% 20bps
Adjusted profit before tax(1) 19.4 15.9 22.0%
Adjusted EPS(1) 5.6p 4.4p 27.3%
Reported operating profit 13.9 7.6 82.9%
Reported profit before tax 17.0 8.5 100.0%
Reported EPS 5.0p 1.9p 163.2%
Dividend per share 0.4p 0.4p -
Net cash balance 166.0 132.1 £33.9m
Forward work position(2) £4.3bn £4.0bn £0.3bn
1. See notes 1 to 4 of the financial statements for adjusted metric
details and definitions, and reconciliation to reported metrics.
2. Forward work is the total of order book and preferred bidder book
which includes revenue from contracts which are partially or fully unsatisfied
and probable revenue from Water and other frameworks included at allocated
volume.
Alex Vaughan, Chief Executive Officer, commented:
"We are performing strongly and are progressing with our strategic priorities
in our chosen growth markets, including broadening our customer and service
mix. In the first half we have delivered a further significant increase in
operating profit together with a sharp growth in earnings per share. The net
cash balance grew to £166m, adjusted operating margin increased as expected,
and due to the quality of our earnings, we remain on track to deliver our
margin targets during FY 24 and FY 25.
"As a result of our strong performance and valued long-term relationships with
our customers, we have increased our forward work position to a very healthy
£4.3bn at the half year, with contract wins across all our sectors. Our focus
on industry-leading solutions, predictable performance and long-term
established customer relations has seen us win further significant Water
contracts post period end and we expect further wins for the Group in the
second half of the year. The quality and customer balance of our forward work
position across our two divisions, together with strong highly visible market
investment, gives us good visibility on future revenue and margin. We continue
to deliver improvements in the business and remain confident in the Group's
prospects.
"As a result of our confidence in our long-term prospects, and our strong cash
position, we have today announced a £10m share buyback which will commence
with immediate effect."
Outlook
Having secured a significant volume of work in H1 24, our high-quality forward
work position stood at £4.3 billion at the end of the first half, with at
least a further £500 million of new work with Southern Water secured post
period end and further wins expected in the second half. The quality and
volume of our forward work gives us good visibility on future revenue and
margin.
We operate in growth markets meeting critical national needs, providing
essential national infrastructure through delivering services that shape,
create and deliver our customers' needs. Our confidence is based on multiple
factors including our clear strategic priorities, our alignment with an
increasingly broad and high-quality customer base which is investing in
critical infrastructure, and our opportunities for further operational and
margin improvements.
While we remain mindful of the macro-economic and geopolitical conditions and
their importance for near-term government priorities and the timing of
spending, we are well positioned for further cash generation and growth in
profits.
We remain on track to deliver an adjusted operating margin run-rate of 3.5%
during the course of FY 24 and 4.5% during the course of FY 25, in line with
our ambition to deliver margins in excess of 5.0%.
Our expectations for FY 24 remain unchanged.
Enquiries
Investors and analysts paul.sharma@costain.com (mailto:paul.sharma@costain.com)
Paul Sharma, Costain +44 (0) 7867 501188
Financial media - Headland costain@headlandconsultancy.com (mailto:costain@headlandconsultancy.com)
Andy Rivett-Carnac +44 (0) 7968 997 365
Charlie Twigg +44 (0) 7946 494 568 (tel:+44%20(0)79%204649%204568)
Analyst & investor presentation
A live webcast of our results by Alex Vaughan (CEO) and Helen Willis (CFO)
will be at 9am on 21 August 2024. Please go to
https://stream.brrmedia.co.uk/broadcast/66a7577827d380a9b7f0b4e7
(https://stream.brrmedia.co.uk/broadcast/66a7577827d380a9b7f0b4e7) to
register for the event.
We will also host a live presentation relating to results via Investor Meet
Company at 10am on 22 August 2024. Investors can sign up to Investor Meet
Company for free and register to meet Costain Group PLC via:
https://www.investormeetcompany.com/costain-group-plc/register-investor
(https://www.investormeetcompany.com/costain-group-plc/register-investor)
Board changes
As announced on 12 March 2024, Mr Bishoy Azmy stepped down from the Board with
effect from 31 March 2024.
Use of alternative performance measures
Throughout this release we use a number of 'adjusted' measures to provide
users with a clearer picture of the underlying performance of the business. To
aid understanding of the underlying and overall performance of the Group,
certain amounts that the Board considers to be material or non-recurring in
size or nature, or related to the accounting treatment of acquisitions, are
adjusted because they are not long term in nature and will not reflect the
long-term performance of the Group. This is in line with how management
monitors and manages the business on a day-to-day basis. These adjustments are
discussed in further detail in notes 1 to 4.
Person responsible
This announcement contains inside information. The person responsible for
this announcement at Costain is Helen Willis, Chief Financial Officer.
ELIMINATING HARM
We have started 2024 with a strong positive safety, health and environmental
performance, having continued our focus as a learning organisation in driving
improvements through our leading indicators for performance. These include
workforce engagement and targeted assurance activities, which are contributing
to our aim of eliminating harm across all our activities. We measure our
safety performance through our lost time injury rate (LTIR) which for H1 24
was 0.09 (H1 23: 0.11). Costain's LTIR is calculated as a ratio of the total
number of lost time incidents (defined by the Health & Safety Executive)
per every 100,000 hours worked.
GROUP TRADING PERFORMANCE
Another strong financial performance
We report both our statutory results, 'reported', and results excluding
adjusting items, 'adjusted'. Key adjusting items for H1 24 include the impact
of this final year of our Transformation programme.
Reported and adjusted revenue was £639.3m in H1 24 (H1 23: £664.4m), a small
reduction on the prior period. We saw increased Natural Resources revenue in
Water, and in Defence and Nuclear Energy. In Transportation, as expected, we
saw reductions in Road volumes, due to the completion of certain projects, and
in Rail due to the completion of our main works at Gatwick Station. We had
increased revenue in Integrated Transport including the Heathrow H7 contract
and new contracts with TfL.
Adjusted operating profit grew by 8.7% to £16.3m (H1 23: £15.0m) and the
adjusted operating margin increased to 2.5% (H1 23: 2.3%), driven mainly by
the improved performance in Transportation resulting from a better margin mix
derived from newer contracts and increased volumes, and margin in Natural
Resources, which has a greater mix of consultancy services.
Reported operating profit increased from £7.6m in H1 23 to £13.9m in H1 24,
with the prior period impacted by an £5.3m non-recurring impairment of an
intangible asset. We also had a £2.4m cost in H1 24 (H1 23: £2.1m) in
respect of our Transformation programme.
Net finance income was £3.1m (H1 23: £0.9m), driven by higher interest
income from increased bank deposits and lower bank charges.
Adjusted profit before tax increased 22.0% to £19.4m (H1 23: £15.9m), with
adjusted basic earnings per share (EPS) up by 27.3% at 5.6p (H1 23: 4.4p), in
part reflecting higher net finance income. Reported profit before tax was up
100.0% at £17.0m (H1 23: £8.5m), while reported basic earnings per share
(EPS) was up 163.2% at 5.0p (H1 23: 1.9p).
Adjustments to reported items
We incurred £2.4m (H1 23: £2.1m) in respect of this final year of our
Transformation programme, and £nil (H1 23: £5.3m) of restructuring costs.
The restructuring costs in H1 23 related to an impairment of an intangible
asset following the repositioning of digital services. We expect
Transformation programme costs of around £5.0m in FY 24, and thereafter such
costs to be minimal and not to be separately disclosed as adjusting items.
Cashflow and liquidity
Cash from operations in H1 24 was £15.2m (H1 23: £16.9m), resulting from
increased adjusted operating profits and timings of certain cash receipts
around the period end.
Free cash flow in H1 24 of £14.2m (H1 23: £26.5m) reflected the timing of
working capital around the period end, as well as higher tax and capital
expenditure payments as we invest in new systems, partially offset by lower
cash flows on adjusting items.
Our net cash position at the end of H1 24 was £166.0m (FY 23: £164.4m, H1
23: £132.1m). We expect our full year end net cash position to be at least
similar to H1 24, excluding the impact of our £10m share buyback, as the
underlying net free cash flow from the business is expected to be offset by
the unwinding of positive working capital timing benefits accumulated since
the end of FY 22, as previously announced in our FY 23 results.
During H1 24 we paid more than 97% of invoices within 60 days (H1 23: 98%). In
January 2024 Costain was re-confirmed as one of the fastest-paying lead
contractors in construction on an average days-to-pay basis following the
submissions to the Government's Duty to Report on Payment Practices and
Performance.
Strength of business model
Critical national needs and the resultant demand for essential infrastructure
ensure that the Transport, Water, Energy and Defence markets continue to offer
significant long-term opportunities for the Group.
As a result of our clear strategy, the Group has continued to make good
progress in building a stronger business. We are:
· Focused on growth markets meeting critical national needs, ensuring
the UK has its essential infrastructure, as set out in the second National
Infrastructure Assessment, and the National Infrastructure and Construction
Pipeline 2023, with more than £700bn of investment expected during the next
ten years, as well as supporting the new Government's critical growth
missions.
· Continuing to build and expand our broader Tier 1 customer base and
be recognised for our long-term established relationships with both new and
existing customers, who are increasing their scale of activities with us:
o In line with Ofwat's draft determination, we expect water investment to at
least double during the next regulatory period to its highest level for
decades and through recent contract awards we are well placed to capitalise on
these opportunities.
o We expect long-term growth in the Energy sector due to the expected
changes in energy mix for the UK. We will continue to build our leading
expertise as a solution provider to address the growing energy transition
investment plans.
o We are well positioned for the significant public and private sector
Transportation, Defence and Nuclear Energy investment.
o In addition, our Integrated Transport business has seen us expand our work
with Heathrow and with TfL in order to progress refurbishment of their
critical transport infrastructure.
· Providing an increasingly broader expert-led service mix of
construction and consultancy services to meet our customers' ecosystem
requirements, helping them by shaping, creating, and delivering pioneering
infrastructure solutions to meet their needs, leveraging our core contracting
expertise in managing major infrastructure programmes.
· Maintaining a strong balance sheet with good levels of positive cash
generation, a strong risk management culture, financing capacity and minimal
pension costs.
Costain enjoys good forward visibility with a strong forward work position.
Our forward work position, which is our combined order book and preferred
bidder book, stood at £4.3bn at period end (FY 23: £3.9bn; H1 23: £4.0bn),
representing more than three times our FY 23 annual revenue. Post the period
end we have won at least a further £500m of new work in Water.
We have more than £538m of secured Group revenue for H2 24 at the end of H1
24, representing around 90% of forecast revenue for the period. Awards have
yet to be made on a number of bids undertaken since 2022 and we currently
expect further awards to be made during H2 24 and FY 25.
Our Transformation programme, which simplifies and increases efficiencies
within the business and is expected to be largely complete during FY 24 is
progressing well, having delivered profit and adjusted operating margin uplift
during H1 24, as well as enabling disciplined investment in business
improvement activities.
The accurate assessment and management of risk and uncertainty is central to
our strategy. This is achieved through rigorous risk management and commercial
control throughout our operations in three key areas:
· A disciplined approach to contract selection, which includes robust
commercial and legal reviews, proactive shaping of procurement approaches with
our customers, and a rigorous multi-stage gating process.
· Commercial and operational assurance, which includes project level
controls, management oversight of forecasts, and cross-disciplinary contract
review meetings.
· Strategic supply chain partners, with application of robust supply
chain management processes.
As a result of the implementation of our strategy and risk management
processes, at the end of H1 24, our order book does not include any single
stage design and build fixed-price construction contracts.
We continue to effectively manage the impact of inflationary pressures on
revenue and costs.
Actuarial pension review
On 30 June 2023, we announced that agreement had been reached with the Trustee
of the Group's defined benefit pension scheme on the 31 March 2022 triennial
actuarial funding valuation and ongoing contributions to the Scheme. The
contribution plan from the Group to the Costain Pension Scheme runs from 1
July 2023 to 31 March 2027 and is for a payment of £3.3m per year, payable in
monthly instalments, scheduled to increase in line with inflation (CPI) each 1
April.
An assessment of the Scheme funding position was carried out on 31 March 2024
and, as the funding level (on a Technical Provisions basis) was more than
101%, contributions will stop from 1 July 2024 to 30 June 2025. These
contributions would have amounted to £3.4m for the period if the Scheme
funding level had been less than 101%.
In addition to contributions being stopped for a year, as the funding level is
above 101%, "dividend parity" will be suspended for a year. Under the dividend
parity arrangement, an additional matching contribution (the excess of the
total dividend above the Scheme contribution) is paid to the Costain Pension
Scheme when the total of the interim and final dividends (or other return of
capital such as a buyback) is greater than the contributions paid into the
Scheme in the previous Scheme financial year, which runs from 1 April to 31
March.
Capital allocation
Costain continues to perform well against its strategic targets and expects to
deliver long-term sustainable value for its stakeholders. The Group's capital
allocation priorities are; investing for growth, progressive dividend,
selective M&A and returning surplus capital.
· Investing for growth. Costain will continue disciplined investment in
key areas such as systems and digitisation that will accelerate its business
transformation. The Group's Transformation programme, which simplifies and
increases efficiencies within the business and is expected to be largely
complete during FY 24, is progressing well. In addition, the Group will invest
around £5.0m in FY 24 in upgrading its HR system to increase efficiencies
within the business.
· Progressive dividend. The Board recognises the importance of dividends
for shareholders and expects to target dividend cover of around three times
adjusted earnings. Dividend payments take into account the cash flow generated
in the period, and the potential impact of the "dividend parity" arrangement
relating to the defined benefit pension scheme, which continues until 31 March
2027.
Dividend payments were resumed in FY 23 with a full year dividend of 1.2p per
share for the year, in line with the pension payments level under the dividend
parity arrangements. In line with the dividend policy adopted in H1 23, the
Board has declared an interim dividend of 0.4p per share for the six months
ended 30 June 2024.
· Selective M&A. The Board retains optionality to pursue strategic
investments in technology, skills and capabilities to enhance our ability to
support customers.
· Returning surplus capital. After ensuring a strong balance sheet and
cash position, identified surplus capital will be returned to shareholders
through share buybacks or special dividends. The current outlook and trading
across Costain's markets is encouraging and is supportive of our strategy.
Having reviewed the Group's strong cash performance and ongoing capital
requirements, the Board has concluded that an on-market share buyback
programme for up to a maximum aggregate consideration of £10m (excluding
stamp duty and expenses) is appropriate and a value-enhancing use of cash,
while maintaining the Group's financial flexibility to invest in its strategy
to deliver sustainable growth and attractive returns.
Dividend
Dividend payments were resumed in H1 23 with an interim dividend of 0.4p per
share for the six months ended 30 June 2023, and a final dividend of 0.8p per
share. In line with the H1 23 payment, the Board has declared an interim
dividend of 0.4p per ordinary share for the six months ended 30 June 2024.
The interim dividend will be paid on 18 October 2024 to shareholders on the
register at the close of business on 13 September 2024.
Payment of the interim dividend will be both as a cash dividend and scrip
dividend alternative. Shareholders wishing to join the scrip dividend scheme
should return a completed mandate form to the Registrar, Equiniti, by 27
September 2024. The scrip reference price will be announced on 19 September
2024.
DIVISIONAL REVIEW
TRANSPORTATION
£m H1 24 adjusted(1) H1 24 reported H1 23 adjusted(1) H1 23 reported Change (adjusted)(1)
Road 171.5 171.5 201.8 201.8 -15.0%
Rail 240.6 240.6 259.3 259.3 -7.2%
Integrated transport 32.2 32.2 26.0 26.0 23.8%
Total revenue 444.3 444.3 487.1 487.1 -8.8%
Divisional operating profit 13.8 13.8 12.2 6.9 13.1%
Divisional operating margin 3.1% 3.1% 2.5% 1.4% 0.6pt
1. See notes 1 to 4 of the financial statements for adjusted metric details
and definitions, and reconciliation to reported metrics.
· As expected, revenue of £444.3m was down 8.8%, reflecting lower
volumes in Road due to the completion of some contracts, and in Rail due to
the completion of our main works for Gatwick Station.
· Increased revenue in Integrated Transport due to our expanding work
at Heathrow and with TfL.
· Adjusted operating margin increased by 0.6pt to 3.1%, due to
improved operating performance and margins in newer contracts.
· Revenue secured for H2 24 is £358.4m for Transportation as at 30
June 2024.
Our revenue in H1 24 was mainly from a number of complex project delivery
schemes for HS2 and National Highways. We are transitioning towards a
better-balanced portfolio, benefitting from activities in Rail, Aviation,
Ports and Local Government, together with continuing activities with HS2 and
National Highways.
Road revenue declined by 15.0% in H1 24 compared with the prior year, as
expected, driven by a reduction in schemes revenue as they near completion. As
a strategic partner for National Highways, we support their key investment
programmes through the Regional Delivery Partnerships (RDP) major projects
frameworks, the Smart Motorways Programme (SMP) Alliance, the SPaTs2
consultancy framework, and Area 14 highway maintenance.
On RDP, in Cornwall we opened to traffic the widened A30 dual carriageway
between Chiverton and Carland Cross on schedule. Our work to upgrade the A1
around Newcastle continues to progress well with the widening of the Birtley
to Coal House section. We have completed the work on the A12 with the
successful granting of the Development Consent Order application for the
Chelmsford to A120 widening project. We have also agreed the scheme budget for
the M60 Simister Island scheme, and have progressed to the detailed design
phase, and are continuing to deliver highway maintenance activities on our
Area 14 contract.
Within the SMP Alliance, our delivery of the M6 Junction 21a-26 smart motorway
upgrade is nearing completion, and we are supporting the National Emergency
Area Retrofit programme on the M1 for smart motorways through design and
delivery of additional stopping areas.
We have a growing pipeline of opportunities in Road for local government
bodies, as well as National Highways, and see good long-term prospects in this
market.
Rail revenue decreased by 7.2% in H1 24, principally because of the completion
of our work at Gatwick Station in the period. The Skanska Costain STRABAG JV
contract to construct the southern section of route for HS2, which has a twin
bore tunnel, now has four tunnel boring machines (TBMs) fully in operation. We
are working closely with HS2 Ltd to optimise our delivery schedule to best
progress the project delivery within its current budget.
We continue to expand our portfolio of work for Network Rail and DfT through
our framework contracts, where we are providing professional consulting
services. The main works to upgrade Gatwick Station concourse for Network Rail
completed in H1 24 following the opening of the station in Q4 23.
We also have several live tenders being progressed in Rail.
Integrated Transport provides a mix of consulting and complex project delivery
to sub-national transport bodies, Central Government, and to Aviation
customers. Revenue increased by 23.8% in H1 24 on the prior year, reflecting
growing work volumes at Heathrow and with TfL.
During H1 24, we continued work for TfL. We were awarded the Gallows Corner
Flyover Detailed Design & Build contract and the design phase for Brent
Cross, with work for both projects underway. We have commenced our next stage
of works on the A40 Westway and continue to support TfL's CCTV service.
During H1 24, we increased the volume of our work at Heathrow to shape, create
and deliver asset renewal and construction projects through the H7 Terminal
Asset Renewal Partner and Major Project Partner frameworks. We also continue
to support other aviation customers at East Midlands, Gatwick, Manchester and
Stansted airports.
We expect that Aviation, Ports, local and devolved transport bodies will offer
strong growth opportunities for the business.
NATURAL RESOURCES
£m H1 24 adjusted(1) H1 24 reported H1 23 adjusted(1) H1 23 reported Change reported
Water 119.8 119.8 107.2 107.2 11.8%
Energy 21.7 21.7 24.0 24.0 -9.6%
Defence and Nuclear Energy(2) 53.5 53.5 46.1 46.1 16.1%
Total revenue 195.0 195.0 177.3 177.3 10.0%
Divisional operating profit 8.4 8.4 7.5 7.5 12.0%
Divisional operating margin 4.3% 4.3% 4.2% 4.2% 0.1pt
1. See notes 1 to 4 of the financial statements for adjusted metric details
and definitions, and reconciliation to reported metrics.
2.(.) Defence and Nuclear includes nuclear-related revenue previously included
in Energy, following the Natural Resources reorganisation.
· Revenue increased by 10.0% to £195.0m, reflecting growth in Water,
and in Defence and Nuclear Energy.
· Divisional operating profit increased to £8.4m (H1 23: £7.5m), and
adjusted operating margin increased by 0.1pt to 4.3%.
· Revenue secured for H2 24 is £180.3m for Natural Resources as at 30
June 2024.
Water delivers a broad range of services to improve asset and operational
resilience across the Water sector, together with decarbonisation
capabilities. Revenue increased by 11.8% on H1 23 with good visibility across
our five-year AMP7 programmes through to 2025, and our recently announced AMP8
projects with Northumbrian Water and United Utilities for the period
2025-2030. We are moving to the commissioning phase for Tideway, where in a
joint venture, we are responsible for the eastern section.
The breadth of our service offering continues to grow with work including
wastewater to gas, water quality assurance and water treatment, as well as
design, maintenance, capital delivery and strategic resource options. We
continue to work on capital delivery programmes for Anglian Water, Severn
Trent Water, Southern Water, and Thames Water in AMP7.
We have strongly increased our presence in the Water sector in the period,
with the combination of the rollover of current contracts, contract extensions
and new customer wins. During H1 24 these include: major AMP8 contract wins
with Northumbrian Water and United Utilities; contract extensions with Severn
Trent Water and Thames Water; and an AMP7 maintenance service provider
contract for United Utilities. Our CMDP+ joint venture with MWH Treatment was
awarded contracts by Southern Water as part its AMP7 investment programme.
Post period end, our CMDP+ joint venture with MWH Treatment won work with
Southern Water on their AMP8 programme valued at least at £500m to Costain.
This contract will extend our long-term continuous relationship with Southern
Water to more than twenty years.
Energy revenue decreased by 9.6% in H1 24 on the prior year, due to delays to
our programmes as we await Final Investment Decisions this year. We expect
significant long-term growth in this sector given the requirement for energy
infrastructure investment to support economic growth, tackle climate change
and enhance the natural environment, as outlined in the National
Infrastructure Commission's recent SNIA. We provide our customers in this
sector with a range of services including engineering design, managed services
and programme management, solving our customers' complex energy challenges
through excellence in engineering and delivery.
Our strategic focus areas are energy transition (hydrogen and carbon capture),
energy resilience (brownfield modifications for enhanced longevity and
performance, energy storage and carbon reduction) and energy connectivity (gas
and electricity networks). In energy transition, in addition to continuing to
support bp's Net Zero Teesside Power and Northern Endurance Partnership joint
ventures with the design of the interconnecting CO2 pipeline and associated
utilities, we have commenced the design of the H2Teesside new hydrogen
pipeline, as an augmentation of our scope for the East Coast Cluster. In
energy resilience, we have been supporting a number of clients including INEOS
FPS and Dana Petroleum with studies and design activities to progress their
sustainability initiatives. In energy connectivity, we continue to manage the
safety-critical gas mains replacement programme for Cadent in the East of
England.
During H1 24, as a continuation of our work in the area, we have been selected
to oversee and manage the engineering, procurement and construction of the
onshore CO(2) gathering systems for the £4bn East Coast Cluster investment.
We continue to support bp as it progresses the wider de-carbonisation of the
local energy supply and pursues innovative carbon capture and storage
solutions, with this contract expected to commence at the end of 2024. We were
selected by Wales and West Utilities to lead a series of studies to develop
their hydrogen vision.
We have seen growth in project delivery and opportunities in supporting our
long-standing petrochemical customers in decarbonising their midstream
operations through large scale energy switching engineering projects,
including hydrogen generation and transportation.
Defence and Nuclear Energy supports several public and private sector
organisations in a variety of customer-side, delivery partnership roles,
across the UK Defence Nuclear Enterprise. Revenue increased by £7.4m, 16.1%
on the prior year, driven by a growth in demand for support within our current
delivery partnership roles with Atomic Weapons Establishment (AWE) and
Babcock, and in our EDF and Sellafield framework contracts. With AWE and
Babcock we work as a construction delivery partner in a consultancy contract,
delivering major infrastructure projects and providing expertise in design and
construction management.
During H1 24, we were awarded two new framework contracts in the nuclear
energy sector and continue to see opportunities for further growth in this
area.
We are currently well positioned across the Defence Nuclear Enterprise,
supporting the UK's Continuous At Sea Deterrent (CASD), and our ambition is to
be the delivery partner of choice for the Ministry of Defence's (MoD) and its
prime contractors, for its future strategic infrastructure needs.
STRATEGY
The Group operates in the UK infrastructure market, focused on providing
solutions that safeguard the future of our planet and transform the
performance of the UK's infrastructure ecosystem, aligned to our purpose of
'Improving People's Lives'.
Markets
In line with the priorities of the National Infrastructure Commission's Second
National Infrastructure Assessment, we are strategically well positioned in
our four chosen markets of Transport, Water, Energy and Defence. These markets
are essential to ensuring the UK has the infrastructure to meet our critical
national needs of economic growth and social change, climate resilience,
energy transition to net zero, environmental resilience and national security.
Our leading service expertise, strong long term customer relationships, and
differentiated broader offering positions the business to benefit from a
greater share of our customers' long-term investment plans, providing
significant opportunities for growth. While the National Infrastructure and
Construction Pipeline 2023 sets out more than £700bn of investment in the
next ten years, we recognise the immediate-term constraints on government
funding.
Customers
Within our chosen markets we work with a growing number of Tier 1 customers
who choose to work with their partners through long-term strategic
five-to-ten-year programmes of work, aligned to us meeting their five-year
business plan outcomes. The strategic nature of these contracts allows us to
build strong long-lasting valued relationships, and for us to maintain
consistency and continuity of workflows over the business plan period. Both
ensure a good quality of work, service and an optimal risk profile.
Services
In working with our customers, our business is differentiated in seeking to
meet their broader business needs, and not merely their new capital
infrastructure needs. This includes asset maintenance, extending the life of
and optimising the performance of existing assets, advising on long term asset
planning and overseeing development programmes. We achieve this by working
with our customers as construction, consulting and digital infrastructure
partners.
PERFORMANCE
Key measures of our performance are:
o Financial performance on growth and margins.
o New customer wins and expansions of existing customer relationships, further
diversifying our revenue base.
Our risk management processes on contracts continues to ensure a robust
operational performance. In addition, we have secured further opportunities
with our customers. Our strategy provides for assured delivery, lower risk
contracts in our orderbook, together with a broader business mix, and our
ambition remains to deliver improving long-term operating margins.
We remain on track to deliver on our operational milestones, outlined in March
2023:
· An adjusted operating margin run-rate of 3.5% during the course of FY
24, as we increase effectiveness within the business through the
implementation of our Transformation programme, the growth of our consultancy
services, the increased effectiveness in procurement and ongoing control of
operating costs.
· An adjusted operating margin run-rate of 4.5% during the course of FY
25 to be reached by improving margins within complex programme delivery
(construction contracts), further efficiencies from our Transformation
programme and an increasing mix of higher-margin contracts.
· We continue to have an ambition for an adjusted operating margin in
excess of 5.0%.
· We expect that central costs will be held around 0.8% to 0.9% of
revenue during FY 24 to FY 25 and we expect divisional margins to increase
during the period to achieve our Group target. We continue to monitor and
manage the impact of inflationary pressures on FY 24 revenue and costs.
Customer growth
During H1 24, we:
· Expanded our presence in Water, winning a series of major contracts
including significant AMP8 agreements with:
o Northumbrian Water, where we will shape and deliver its strategic
infrastructure upgrade programme over a potential 12-year period.
o Severn Trent Water, which will see us improve water and wastewater
treatment infrastructure across the Company's portfolio.
o United Utilities, where we will work with other partners to deliver a
£3bn programme to upgrade assets including water and wastewater treatment
sites, pumping stations and reservoirs.
o And, post period end, a major AMP8 contract with Southern Water in our
joint venture.
· Won additional contracts with Southern Water and Thames Water to
support new strategic assets, water supply resilience and improved wastewater
treatment.
· Were confirmed as National Highways' partner for the next stage of
the M60 Simister Island upgrade.
· Have been selected by bp's Net Zero Teesside Power and Northern
Endurance Partnership joint ventures to oversee the construction of a CO(2)
gathering systems for carbon capture and storage, and by bp's H2Teesside to
design a new hydrogen pipeline, both for the East Coast Cluster.
· Grew our rail consultancy with work on critical national programmes
such as Northern Powerhouse Rail, Weather Resilience and R&D programmes.
· Were appointed by TfL to progress refurbishment of critical pieces of
transport infrastructure, and expanded our work with Heathrow. Have been
chosen by Wales and West Utilities to examine the integration of hydrogen
refuelling stations into the UK's gas network.
· Won additional project management commissions for significant defence
customers and new nuclear energy contracts.
PEOPLE
Our people strategy is focused on six key themes:
· Excellent leadership and line management role modelling of our values
and behaviours, to motivate and engage our people.
· Having a diverse, inclusive, and thriving workforce.
· Creating high-performing, agile teams with a one Costain ethos.
· Developing skills, capabilities, and talent now and for the future
giving our people the opportunity to grow their careers at Costain.
· Ensuring our people feel valued, respected, recognised and
appropriately rewarded.
· Valuing the health and wellbeing of our people and the safety of
everyone working with us and around us, which is one of our core values.
Costain has invested in a new HR system to improve employee experience,
enhance cybersecurity, and enable greater digital integration. The system has
been through the design and build phases and will be launched to the business
at the end of Q4 24 following testing.
In April 2024, we held a dedicated leadership impact day where all Costain
offices and project teams collectively took time to create a safe space to
talk about wellbeing. The day was focused on the wellbeing tools and resources
available to our people and discussing areas for improvement to ensure
everyone can be at their best.
One of our priorities is to develop our people and give them opportunities to
grow their careers at Costain. We have a leadership framework that provides
the blueprint for leadership at Costain and is being embedded into our people
processes and development offer.
In recognition of the positive action Costain has taken over recent years on
gender equality, in June, we were listed as one of The Times Top 50 Employers
for Gender Equality 2024. Compared to industry benchmarks, Costain's overall
gender and ethnic diversity can be considered industry-leading. At the close
of H1 24, 28.8% of colleagues were female (FY 23: 27.5%) and 15.7% were of an
ethnic minority (FY 23: 14.5%).
Costain's gender pay gap continues to reduce, underpinned by targeted action
on female development and increasing the diversity of our talent pipeline to
address underrepresentation in the upper-middle and upper-pay quartiles.
Following the successful pilot of a women's empowerment programme in 2023, we
have commissioned and commenced further intakes in 2024.
For the second year, we voluntarily disclosed Costain's ethnicity pay gaps,
forming part of an integrated pay report alongside the statutory gender pay
gap disclosure. We recognise that employees from different ethnic backgrounds
have different experiences of pay and reward, which is why we report separate
pay gaps for different ethnic groups. We have held and will be holding further
listening circles with our employees for the ethnic groups represented in our
pay gaps to better understand employee experiences and how best to tackle our
ethnicity pay gaps.
In April 2024, we announced increased support for colleagues who are parents
and carers, enhancing our maternity and adoption leave offerings to 26 weeks
at full pay, paternity leave to 8 weeks at full pay and introducing paid
carers' leave. We continue to improve workplace accessibility, with direct
input from our employee networks in the design of our new offices and site
setup standards. In H2 24, Costain will be assessed against the Disability
Confident level 3 standard, and if successful will be awarded the accolade of
being a Disability Confident Leader under the conditions of the scheme.
Applying sustainable procurement principles is optimising the value we provide
for our customers and enhancing the social and environmental outcomes
achieved. In H1 24, our contracts (including joint ventures) spent £320m with
SMEs, representing 40% of their total spend, exceeding the UK Government
target of 33%, and exceeding our FY 23 performance of 38%.
PLANET
Carbon and climate change
Through the delivery of low-carbon design, best-in-class delivery and creating
climate-resilient infrastructure, Costain is well placed to support our
customers in their transition to net zero emissions.
Pioneering solutions to address the challenges
Costain has recently secured nationally significant contracts with Net Zero
Teesside Power and the Northern Endurance Partnership for a landmark carbon
capture scheme (as one of nine specialist partners) and with Thames Water to
design a new reservoir in Oxfordshire that could supply up to 15 million
people across the South East of the UK. We continue to support OFWAT with
constructability advice on infrastructure investment options. In August, we
were awarded a multimillion-pound front-end engineering and design (FEED)
contract by bp for a new hydrogen pipeline network in the Teesside area.
Driving our services towards Net Zero
In February 2024, Costain received approval from the Science Based Target
initiative for its near and long-term net zero targets which are now forming
the basis of our climate transition plan and nature positive plan which is in
development. The plans will see Costain aligned with the Transition Plan
Taskforce Disclosure Framework, Taskforce for Nature-related Financial
Disclosures (TNFD) respectively and build on the good progress of Costain's
climate change action plan.
The recent focus of Costain's climate change action plan has been to improve
data through a new carbon data tool. Costain's new tool which is currently
being implemented will enable enhanced data analytics, integration with
technical baselines and the ability to track performance with greater
frequency. The tool will fundamentally improve how data is collected across
all scopes, including supplier-sourced Scope 3 emissions.
In 2022, Costain issued a hydrotreated vegetable oil (HVO) fuel mandate which
contributed to a 24% reduction in scope 1 emissions in 2023, with HVO making
up 88% of all fuel purchased. Increasing the proportion of projects using
mains-supplied electricity rather than generators has been a recent priority,
contributing to a combined Scope 1 and 2 emissions reduction of 16% in 2023.
In 2024, we have taken action to eliminate the use of natural gas to heat our
Manchester office, by installing an energy-efficient variable refrigerant flow
(VRF) heat recovery system. As previously announced, Costain is moving to a
new London headquarters which will further our emissions reduction and energy
efficiency from H2 24.
Costain engineers play a proactive role in supporting our customers to
optimise solutions and creating opportunities for carbon reduction through our
collaborative approach to applying the principles of PAS2080.
On the TfL Gallows Corner project, Costain and design consultant Pell Frishman
identified over 440tCO(2)e of carbon savings through effective and efficient
design solutions. Working in accordance with PAS2080 the team developed
opportunities such as optimised steelwork geometries and sizing and the use of
pre-cast concrete.
For National Highways M60 Simister Island Interchange, Costain, in partnership
with Jacobs and AECOM, has prioritised reusing existing assets within the
design, achieving a 5% reduction in emissions from the baseline design. This
approach will also reduce land take, reduce impact on biodiversity and be most
cost-efficient for the customer.
Nature
To safeguard our planets future, action on restoring nature and becoming
nature positive is critically linked to the transition to net zero emissions.
Costain has committed to delivering biodiversity net gain on all construction
contracts (where relevant) and contributing to a wider restoration of nature,
aligning with the increased priority of our customers. Costain is taking a
leading role on biodiversity and nature through various industry groups and
has been at the forefront of the sector by voluntarily disclosing against the
Task Force for Nature Related Financial Disclosure (TNFD) recommendations in
our 2023 ESG report.
The recently opened A30 Chiverton to Charland Cross scheme, which Costain
delivered on behalf of National Highways is benefitting local wildlife with 33
multi-species crossing points added along the route, 150,000 trees planted,
and the creation of an additional 4.5 hectares of new woodland.
Costain through the CMDP+ joint venture with MWH Treatment delivered a
pioneering scheme for Southern Water at the Hailsham South Wastewater
Treatment Works (WTW). The scheme created an ecosystem from redundant assets
and reused materials, going beyond normal industry practice to enhance the
natural environment. Upgrading the WTW was necessary to comply with an
enhanced Environment Agency discharge consent for phosphorous. The innovative
solution provided by the CMDP+ joint venture reduced 324 lorry movements,
eliminated 16.9tCO(2)e through the reuse of excavated spoil and achieved
biodiversity net gain by retaining wetland. The project met its objectives and
achieved the lowest phosphorus limits in the UK.
Social value
In H1 24 we launched our new social value plan, which is underpinned by our
comprehensive social value framework. The social value plan demonstrates our
commitment and enabling actions to achieve our goal of improving one million
lives by 2030. As part of this initiative, we are implementing a new social
value tool which will enhance our ability to forecast, measure, monitor and
evaluate our social value, ensuring greater transparency and accountability.
We continue to prioritise our community relationships, ensuring we are a good
neighbour and present a positive image of the construction industry. In H1 24,
the Considerate Constructor Scheme rated Costain contracts on average 47/50
(FY23: 45/50) exceeding the industry average of 41/50. This third-party
industry assessment highlights the high standards expected of Costain
contracts, confirming Costain's position as an industry leader in responsible
business.
FINANCIAL REVIEW
Divisional adjusted to reported reconciliation
Transportation Natural Resources Group
H1 24 H1 23 Change H1 24 H1 23 Change H1 24 H1 23 Change
Revenue £m
Reported 444.3 487.1 -8.8% 195.0 177.3 10.0% 639.3 664.4 -3.8%
Operating profit £m
Adjusted 13.8 12.2 13.1% 8.4 7.5 12.0% 16.3 15.0 8.7%
Adjusting items - (5.3) - - (2.4) (7.4)
Reported 13.8 6.9 100.0% 8.4 7.5 12.0% 13.9 7.6 82.9%
Adjusting items
We incurred £2.4m (H1 23: £2.1m) on transformation and £nil (H1 23: £5.3m)
on restructuring costs. Restructuring costs in H1 23 included intangible asset
impairment charges relating to development costs incurred as we repositioned
our digital services towards growth. We expect transformation costs of around
£5.0m in FY 24 and thereafter such costs to be minimal and not to be
separately disclosed as adjusting items.
Net financial income/(expense)
Net finance income amounted to £3.1m (H1 23: £0.9m). Interest income from
bank deposits amounted to £3.5m (H1 23: £1.6m). The charges on banking
facilities and other similar charges was £0.7m (H1 23: £1.6m). In addition,
the net financial income for H1 24 includes the interest income on the net
assets of the pension scheme of £1.3m (H1 23: £1.6m) and the interest
expense on lease liabilities of £1.0m (H1 23: £0.7m) under IFRS16.
Tax
The Group has a tax charge of £3.5m (H1 23: £3.4m) giving an effective tax
rate of 20.8% (H1 23: 40.0%). The adjusted effective tax rate was 21.3% (H1
23: 24.5%). We expect the effective tax rate in 2024 to remain marginally
below the blended statutory tax rate of 25%.
Cashflow
The Group generated an adjusted £14.2m free cash inflow in H1 24 (H1 23:
£26.5m), lower than in the same period last year largely due to the timing of
working capital and higher tax and capital expenditure payments as we invest
in new systems, partially offset by lower pension deficit contributions and
cash flows on adjusting items.
£m H1 24 H1 23
Cash from operations 15.2 16.9
Add back adjusting items 3.3 4.0
Add back pension deficit contributions 1.7 5.7
Less taxation (1.9) -
Less capital expenditure (4.1) (0.1)
Free cash flow 14.2 26.5
The Group had a positive net cash balance of £166.0m as of 30 June 2024 (FY
23: £164.4m; H1 23: £132.1m) comprising Costain cash balances of £96.2m (FY
23: £105.2m; H1 23: £77.6m), cash held by joint operations of £69.8m (FY
23: £59.2m; H1 23: £54.5m) and borrowings of £nil (FY 23: £nil; H1 23:
£nil). During H1 24, the Group's average month-end net cash balance was
£173.9m (FY 23: £141.4m; H1 23: £127.9m) and the Group's average week-end
net cash balance was £168.2m (FY 23: £141.0m; H1 23: £126.5m). Utilisation
of the total bonding facilities as of 30 June 2024 was £65.3m (FY 23:
£69.9m, H1 23: £78.9m).
£m H1 24 H1 23 FY 23
Cash and cash equivalents at the beginning of year 164.4 123.8 123.8
Net cash flow 1.6 8.3 40.6
Cash and cash equivalents at the end of year 166.0 132.1 164.4
Borrowings - - -
Net cash 166.0 132.1 164.4
Pensions
Cash contributions made to the scheme during H1 24 amounted to £1.7m (H1 23:
£5.7m) and the charge to operating profit in respect of the administration
cost of the UK Pension Scheme in H1 24 was £0.1m (H1 23: £0.1m).
As at 30 June 2024, the Group's pension scheme was in surplus in accordance
with IAS 19 at £55.1m (FY 23: £53.5m surplus; H1 23: £58.7m surplus). The
movement in the IAS 19 valuation, being a slight increase in surplus from 31
December 2023 to 30 June 2024 was due to a change in discount rate assumptions
resulting in a decrease in benefit obligations.
Forward work position
Our forward work position is the combination of our order book and preferred
bidder book and stood at £4.3bn at period end.
Our order book stood at £1.8bn at period end (FY 23: £2.1bn; H1 23:
£2.5bn). The order book evolves as contracts progress and as new contracts
are added at periods aligned to our customers' strategic procurement windows
which are typically every five years. The order book does not therefore
provide a complete picture of the Group's potential future revenue
expectations.
We have a continuing shift towards the preferred bidder book away from the
order book as we continue to secure long-term (five-to-ten-year) framework
positions with our customers, especially in the water sector, providing a
reliable and long-term stream of future work.
The preferred bidder book increased to £2.5bn at period end (FY 23: £1.8bn;
H1 23: £1.5bn) and includes contracts in Water, Energy, Defence and Nuclear
Energy, Road and Integrated Transport, including Heathrow. The preferred
bidder book comprises contracts for which we have been selected on frameworks
where a further works order is required prior to the works commencing.
We note that some of our framework and consulting revenue is not recorded in
our order book, or preferred bidder book, as it is undefined and is expected
to represent an increasing proportion of our future revenue.
DIRECTORS REPORT
Going concern
In determining the appropriate basis of preparation of the financial
statements for the six months ended 30 June 2024, the directors are required
to consider whether the Group can continue in operational existence for the
foreseeable future, being a period of at least twelve months from the date of
approval of the accounts. Having undertaken a rigorous assessment of the
financial forecasts, including its liquidity and compliance with covenants,
the Board considers that the Group has adequate resources to remain in
operation for the foreseeable future and, therefore, have adopted the going
concern basis for the preparation of the financial statements. Please see note
1 for more details.
Principal Risks and Uncertainties
The Directors consider that the principal risks facing the Group, including
those that would threaten the successful and timely delivery of its strategic
priorities, future performance, solvency and liquidity, remain substantially
unchanged from those identified on pages 45 to 49 of the Group's Annual Report
for the year ended 31 December 2023 which can be found at www.costain.com
(http://www.costain.com) .
There we define and describe the principal risks that are most relevant to the
Group including controls and key mitigating actions assigned to them. In
summary, the Group's principal risks and uncertainties are as follows: 1)
Safety, health, or environmental incidents 2) Securing work and responding to
changes in customer spending plans 3) Managing our contracts and economic
factors 4) Setting up, mobilising and delivering our Projects 5) Procurement
and supply chain performance 6) Attracting, developing and retaining talent 7)
Financial resilience 8) Information security 9) Climate Change and
sustainability and 10) Delivering the benefits of our Transformation
programme.
The Board reviews the status of all principal and emerging risks with a
notable potential impact at Group level throughout the year. Additionally, the
Board carries out focused risk reviews. These reviews include an analysis of
principal risks, together with the controls, monitoring and assurance
processes established to mitigate those risks to manageable levels.
Separately, the Audit and Risk Committee carries out a review of the risk
assurance framework and the effectiveness of risk management and internal
controls.
Statement of Directors' Responsibilities
The Directors confirm that these condensed consolidated half year financial
statements have been prepared in accordance with UK adopted International
Accounting Standard 34, 'Interim Financial Reporting', and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority and that the interim management report includes a fair
review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
• an indication of important events that have occurred during the first
six months and their impact on the condensed set of financial statements, and
a description of the principal risks and uncertainties for the remaining six
months of the financial year; and
• material related-party transactions in the first six months and any
material changes in the related party transactions described in the last
Annual Report.
The current Directors of Costain Group PLC are listed in the Annual Report for
the year ended 31 December 2023. As announced on 12 March 2024, Mr Bishoy Azmy
stepped down from the Board with effect from 31 March 2024.
For and on behalf of the Board
Alex Vaughan
Helen Willis
Chief Executive
Officer
Chief Financial Officer
21 August 2024
Cautionary statement
This report contains forward-looking statements. These have been made by the
directors in good faith based on the information available to them up to the
time of their approval of this report. The directors can give no assurance
that these expectations will prove to have been correct. Due to the inherent
uncertainties, including both economic and business risk factors underlying
such forward-looking information, actual results may differ materially from
those expressed or implied by these forward-looking statements. The directors
undertake no obligation to update any forward-looking statements whether as a
result of new information, future events or otherwise.
Shareholder information
There is a large amount of information about our business on our website,
www.costain.com (http://www.costain.com) . This includes copies of recent
investor presentations as well as London Stock Exchange announcements.
GROUP INCOME STATEMENT
For the six months ended 30 June 2024
£m Note
H1 24 H1 23
unaudited unaudited
Revenue 4 639.3 664.4
Cost of Sales (594.7) (618.0)
Gross profit 44.6 46.4
Impairment of intangible asset 9 - (5.3)
Other administrative expenses (30.7) (33.5)
Administrative expenses (30.7) (38.8)
Operating profit 13.9 7.6
Profit from operations 4 13.9 7.6
Finance income 5 4.8 3.2
Finance expense 5 (1.7) (2.3)
Net finance income 3.1 0.9
Profit before tax 17.0 8.5
Taxation 6 (3.5) (3.4)
Profit for the period attributable to equity holders of the parent 13.5 5.1
Earnings per share
Basic 7 5.0p 1.9p
Diluted 7 4.9p 1.8p
GROUP STATEMENT OF COMPREHENSIVE INCOME AND EXPENSE
For the six months ended 30 June 2024
£m H1 24 H1 23
unaudited unaudited
Profit for the period 13.5 5.1
Total items that may be reclassified subsequently to profit or loss - -
Items that will not be reclassified to profit or loss:
Remeasurement of retirement benefit asset (1.3) (8.7)
Tax recognised on remeasurement of retirement benefit asset 0.1 2.0
Total items that will not be reclassified to profit or loss (1.2) (6.7)
Other comprehensive expense for the period (1.2) (6.7)
Total comprehensive income/(expense) for the period attributable to equity 12.3 (1.6)
holders of the parent
GROUP BALANCE SHEET
£m Note 30 June 2024 31 December 2023
unaudited audited
Assets
Non-current assets
Intangible assets 9 48.3 45.7
Property, plant and equipment 10 26.8 26.8
Equity accounted investments 0.4 0.4
Retirement benefit asset 12 55.1 53.5
Trade and other receivables 4.5 4.2
Insurance recovery asset 0.5 1.7
Deferred tax 9.3 11.8
Total non-current assets 144.9 144.1
Current assets
Trade and other receivables 168.7 149.1
Insurance recovery asset 13.3 11.0
Taxation 0.4 -
Cash and cash equivalents 11 166.0 164.4
Total current assets 348.4 324.5
Total assets 493.3 468.6
Liabilities
Non-current liabilities
Other payables 2.1 2.2
Lease liabilities 12.8 14.0
Total non-current liabilities 14.9 16.2
Current liabilities
Trade and other payables 225.1 207.8
Taxation - 0.6
Lease liabilities 9.9 10.3
Provisions for other liabilities and charges 13.1 14.3
Total current liabilities 248.1 233.0
Total liabilities 263.0 249.2
Net assets 230.3 219.4
Equity
Share capital 13 2.8 138.3
Share premium 16.5 16.4
Translation reserve 0.6 0.6
Capital redemption reserve 13 136.4 -
Treasury shares (1.0) (1.9)
Retained earnings 75.0 66.0
Total equity 230.3 219.4
GROUP STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2024
£m
Share capital Share premium Translation reserve Capital redemption reserve Treasury shares Retained earnings Total equity
At 1 January 2023 137.5 16.4 0.6 - - 56.7 211.2
audited
Profit for the period - - - - - 5.1 5.1
Other comprehensive income - - - - - (6.7) (6.7)
Issue of shares under employee share schemes 0.8 - - - - (0.8) -
Shares purchased to satisfy employee share schemes - - - - - (0.1) (0.1)
Equity-settled share-based payments - - - - - 0.8 0.8
At 30 June 2023 138.3 16.4 0.6 - - 55.0 210.3
unaudited
At 1 January 2024 138.3 16.4 0.6 - (1.9) 66.0 219.4
audited
Profit for the period - - - - - 13.5 13.5
Other comprehensive expense - - - - - (1.2) (1.2)
Issue of ordinary shares under employee share schemes (see note 13) 0.9 - - - (0.6) (0.2) 0.1
Shares purchased to satisfy employee share schemes - - - - 0.8 (0.8) -
Acquisition of treasury shares - - - - (0.5) - (0.5)
Nominal value reduction (see note 13) (136.4) - - 136.4 1.2 (1.2) -
Equity-settled share-based payments - - - - - 1.1 1.1
Dividends paid - 0.1 - - - (2.2) (2.1)
At 30 June 2024 2.8 16.5 0.6 136.4 (1.0) 75.0 230.3
unaudited
GROUP CASH FLOW STATEMENT
For the six months ended 30 June 2024
£m Note H1 24 H1 23
unaudited unaudited
Cash flows from/ (used by) operating activities
Profit for the year 13.5 5.1
Adjustments for:
Finance income 5 (4.8) (3.2)
Finance expense 5 1.7 2.3
Taxation 6 3.5 3.4
Loss on disposal of property, plant and equipment 0.5 -
Impairment of intangible asset - 5.3
Depreciation of property, plant and equipment 10 5.8 6.9
Amortisation of intangible assets 9 0.1 0.4
Shares purchased to satisfy employee share schemes - (0.1)
Share-based payments expense 1.1 0.8
Cash from operations before changes in working capital and provisions 21.4 20.9
Increase in trade and other receivables (20.6) (4.8)
Increase in trade and other payables 17.2 9.7
Movement in other provisions and employee benefits (2.8) (8.9)
Cash from operations 15.2 16.9
Interest received 2.5 1.6
Interest paid (1.5) (0.7)
Taxation paid (1.9) -
Net cash from operating activities 14.3 17.8
Cash flows from/ (used by) investing activities
Additions to property, plant and equipment (1.8) -
Additions to intangible assets (2.3) (0.1)
Net cash used by investing activities (4.1) (0.1)
Cash flows from/ (used by) financing activities
Ordinary dividends paid (2.1) -
Issue of ordinary share capital 0.1 -
Acquisition of treasury shares (0.5) -
Repayments of lease liabilities (6.1) (9.4)
Net cash used by financing activities (8.6) (9.4)
Net increase in cash and cash equivalents 1.6 8.3
Cash and cash equivalents at beginning of the period 11 164.4 123.8
Cash and cash equivalents at end of the period 11 166.0 132.1
NOTES TO THE FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
Costain Group PLC ("the Company") is a public limited company domiciled in
England and incorporated in England and Wales.
This condensed consolidated interim financial report for the half year
reporting period ended 30 June 2024 has been prepared in accordance with the
UK-adopted International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority. The interim report does not include all
of the notes normally included in an annual financial report. Accordingly,
this report is to be read in conjunction with the annual audited financial
statements within the Annual Report and Accounts for the year ended 31
December 2023, which has been prepared in accordance with the UK-adopted
International Accounting Standards and with the requirements of the Companies
Act 2006. Those accounts have been reported on by the Group's auditors and
delivered to the Registrar of Companies. The audit report for 2023 was (i)
unqualified and (ii) did not contain a statement under section 498(2) or (3)
of the Companies Act 2006.
The Group has applied the following standards and amendments for the first
time for the period commencing 1 January 2024:
• Classification of Liabilities as Current or Non-current and Non-current
liabilities with covenants - Amendments to IAS 1;
• Lease liability in sale and leaseback - Amendments to IFRS 16; and
• Supplier Finance Arrangements - Amendments to IAS 7 and IFRS 7.
The amendments listed above did not have any impact on the amounts recognised
in prior periods and are not expected to significantly affect the current or
future periods.
Going concern
The Group's principal business activity involves work on the UK's
infrastructure, mostly delivering long-term contracts with a number of
customers. To meet its day-to-day working capital requirements, it uses cash
balances provided from shareholders' capital and retained earnings and its
borrowing facilities. These borrowing facilities give the Group access to an
£85m sustainability-linked revolving credit facility (RCF) and surety and
bank bonding facilities totalling £270m. These facilities have a leverage
covenant of net debt/EBITDA ≤1.5 times, an interest covenant of EBITA/net
interest payable covenant of ≥4.0 times and a liquidity covenant whereby the
aggregate of, without double counting, any cash and cash equivalent
investments and the available commitment under the facility does not fall
below £50.0m. These financial covenants are tested quarterly. As at 30 June
2024, the Group had a leverage covenant ratio of below zero (the Group had no
net debt) and an interest covenant ratio of 13.3 times. As part of its
contracting operations, the Group may be required to provide performance and
other bonds. It satisfies these requirements by utilising its £20m bank
bonding and £250m surety company bonding facilities.
In determining the appropriate basis of preparation of the financial
statements for the six months ended 30 June 2024, the directors are required
to consider whether the Group can continue in operational existence for the
foreseeable future, being a period of at least twelve months from the date of
approval of the financial statements.
In assessing the going concern assumption, the Board reviewed the Group's base
case plans for the period to 30 September 2025, being the first covenant
deadline more than 12 months after the approval of the financial statements.
The directors have assumed that the current RCF remains in place with the same
covenant requirements through to its current expiry date, which is beyond the
end of the period reviewed for Going Concern purposes. The base case assumes
delivery of the Board approved strategic and financial plans. As part of the
assessment, the Board also identified severe but plausible downsides affecting
future profitability, working capital requirements and cash flow. The severe
but plausible downsides include applying the aggregated impact of lower
revenue, lower margins, higher working capital requirements and adverse
contract settlements.
Both the base case and severe but plausible forecasts show significant
headroom and indicate that the Group will be able to operate within its
available banking facilities and covenants throughout this period.
Having undertaken a rigorous assessment of the financial forecasts, including
its liquidity and compliance with covenants, the Board considers that the
Group has adequate resources to remain in operation for the foreseeable future
and, therefore, the directors have adopted the going concern basis in the
preparation of the financial statements.
Alternative performance measures
Income statement presentation - Alternative performance measures
The Group discloses alternative performance measures, in addition to statutory
disclosures, to provide investors with supplementary information which may be
relevant to the Group's future performance. 'Adjusted profit' excludes
'adjusting items', which are significant items of income and expenditure that
the Board considers are incremental to business operations and do not reflect
the long-term performance of the Group. These adjusted measures are reconciled
to statutory disclosures, with the tax impact given, in note 3. Presenting
results on this basis is consistent with internal reporting to the Board.
Alternative performance measures do not have standardised meanings and,
therefore, they may not be comparable between companies.
The directors exercise judgement in determining classification as an
'adjusting item' using quantitative and qualitative factors. Consideration is
given, both individually and collectively, to the circumstances giving rise to
the item, its materiality and whether it is expected to recur.
'Adjusted profit' may exclude income and expenditure related to acquisitions,
discontinued operations, transformation costs, restructuring costs,
litigation, and impairments, where the impairment is the result of an
isolated, non-recurring event. 'Adjusted earnings per share' is calculated
using 'Adjusted profit'.
The Group also presents net cash/bank debt and adjusted free cash flow as
alternative performance measures in the front of the annual report. Net
cash/bank debt is defined as cash and cash equivalents less interest-bearing
borrowings (excluding leases under IFRS 16 and net of unamortised arrangement
fees). Adjusted free cash flow is defined as cash generated from operations,
excluding cash flows relating to 'adjusting items' and pension deficit
contributions, less taxation and capital expenditure. The directors consider
that these measures provide useful information about the Group's liquidity
position.
2. SIGNIFICANT AREAS OF JUDGEMENT AND ESTIMATION
The estimates and underlying assumptions used in the preparation of these
financial statements are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the
revision affects only that period, or in the period of the revision and future
periods if the revision affects both current and future periods.
The directors consider that the significant areas of judgement made by
management that have a significant effect on the Group's performance as well
as those estimates with a significant risk of material adjustment during the
second half of the year are unchanged from those identified on pages 150 to
153 of the Annual Report for the year ended 31 December 2023.
3. RECONCILIATION OF REPORTED OPERATING PROFIT TO
ADJUSTED OPERATING PROFIT
Adjusted operating profit and adjusted earnings per share are presented as
non-GAAP alternative performance measures. The Board considers the adjusted
measures better reflect the underlying trading performance of the Group for
the reasons described in note 1.
The profit adjustments represent amounts included in the income statement.
The Group incurred £2.4m (H1 23: £2.1m) on transformation. There were no
intangible assets impaired in H1 24 (H1 23: £5.3m).
Six months ended 30 June 2024 Adjusted Intangible impairment Adjusting items Total
£m £m £m £m
Revenue 639.3 - - 639.3
Cost of sales (594.7) - - (594.7)
Gross profit 44.6 - - 44.6
Administrative expenses before other items (28.3) - - (28.3)
Transformation costs - - (2.4) (2.4)
Administrative expenses (28.3) - (2.4) (30.7)
Operating profit/loss 16.3 (2.4) 13.9
Profit/ (loss) from operations 16.3 - (2.4) 13.9
Net finance income 3.1 - - 3.1
Profit/ (loss) before tax 19.4 - (2.4) 17.0
Taxation (4.1) - 0.6 (3.5)
Profit/ (loss) for the period 15.3 - (1.8) 13.5
Basic earnings per share 5.6p 5.0p
Six months ended 30 June 2023 Total
Adjusted Intangible impairment Other adjusting items
£m £m £m £m
Revenue 664.4 - - 664.4
Cost of sales (618.0) - - (618.0)
Gross profit 46.4 - - 46.4
Administrative expenses before other items (31.4) - - (31.4)
Impairment of intangible asset - (5.3) - (5.3)
Transformation costs - - (2.1) (2.1)
Administrative expenses (31.4) (5.3) (2.1) (38.8)
Operating profit/ (loss) 15.0 (5.3) (2.1) 7.6
Profit/ (loss) from operations 15.0 (5.3) (2.1) 7.6
Net finance income 0.9 - - 0.9
Profit/ (loss) before tax 15.9 (5.3) (2.1) 8.5
Taxation (3.9) - 0.5 (3.4)
Profit/ (loss) for the period 12.0 (5.3) (1.6) 5.1
Basic earnings per share 4.4p 1.9p
4. OPERATING SEGMENTS
The Group has two business segments: Natural Resources and Transportation.
These segments are strategic business units with separate management and have
different customers or offer different services. This information is provided
to the chief executive who is the chief operating decision maker. The segments
are discussed in the Strategic Report section of these financial statements.
The Group evaluates segment performance on the basis of profit or loss from
operations before interest and tax expense and before 'adjusting items'. The
segment results that are reported to the chief executive include items
directly attributable to a segment as well as those that can be allocated on a
reasonable basis. Other items are allocated to the operating segments where
appropriate, but otherwise are viewed as Central costs.
Six months ended 30 June 2024 Natural Central
Resources Transportation costs Total
£m £m £m £m
Segment revenue
Total revenue 195.0 444.3 - 639.3
Segment profit/ (loss)
Adjusted operating profit/ (loss) 8.4 13.8 (5.9) 16.3
Profit/ (loss) from operations before adjusting items 8.4 13.8 (5.9) 16.3
Adjusting items:
Transformation costs - - (2.4) (2.4)
Profit/ (loss) from operations 8.4 13.8 (8.3) 13.9
Net finance income 3.1
Profit before tax 17.0
Six months ended 30 June 2023 Natural Central
Resources Transportation costs Total
£m £m £m £m
Segment revenue
Total revenue 177.3 487.1 - 664.4
Segment profit/ (loss)
Adjusted operating profit/ (loss) 7.5 12.2 (4.7) 15.0
Profit/ (loss) from operations before adjusting items 7.5 12.2 (4.7) 15.0
Adjusting items:
Intangible impairment - (5.3) - (5.3)
Transformation costs - - (2.1) (2.1)
Profit/ (loss) from operations 7.5 6.9 (6.8) 7.6
Net finance income 0.9
Profit before tax 8.5
5. NET FINANCE INCOME/ (EXPENSE)
£m H1 24 H1 23
Interest income from bank deposits 3.5 1.6
Interest income on the net assets of the defined benefit pension scheme 1.3 1.6
Finance income 4.8 3.2
Interest payable on banking facilities and other similar charges* (0.7) (1.6)
Interest expense on lease liabilities (1.0) (0.7)
Finance expense (1.7) (2.3)
Net finance income 3.1 0.9
*Other similar charges include arrangement and commitment fees payable.
6. TAXATION
£m H1 24 H1 23
On profit for the period
Current tax charge for the period (0.9) (0.7)
Deferred tax charge for the period (2.6) (2.7)
Tax charge in the consolidated income statement (3.5) (3.4)
£m H1 24 H1 23
Tax reconciliation
Profit before tax 17.0 8.5
Taxation at 25.0% (H1 23: 23.5%) (4.2) (2.0)
Adjustments in respect of prior years 0.7 -
Disallowed expenses - (1.3)
Rate adjustment relating to deferred taxation - (0.1)
Tax charge in the consolidated income statement (3.5) (3.4)
7. EARNINGS PER SHARE
The calculation of earnings per share is based on profit of £13.5m (H1 23:
£5.1m) and the number of shares set out
below.
H1 24 H1 23
Number Number
(millions) (millions)
Weighted average number of ordinary shares in issue for basic earnings per 273.2 275.8
share calculation
Dilutive potential ordinary shares arising from employee share schemes 2.9 4.6
Weighted average number of ordinary shares in issue for diluted earnings per 276.1 280.4
share calculation
8. DIVIDENDS
£2.2m dividends were paid or provided for in respect of the six months ended
30 June 2024 (H1 23: none).
9. INTANGIBLE ASSETS
Goodwill Customer relationships Other acquired intangibles Other intangibles Assets under development* Total
£m £m £m £m £m £m
Cost
At 1 January 2023 54.1 15.4 9.7 16.2 - 95.4
Additions - - - 0.1 - 0.1
Disposals - - - (0.1) - (0.1)
At 31 December 2023 54.1 15.4 9.7 16.2 - 95.4
At 1 January 2024 54.1 15.4 9.7 16.2 - 95.4
Additions - - - - 2.7 2.7
Disposals - - - - - -
At 30 June 2024 54.1 15.4 9.7 16.2 2.7 98.1
Accumulated amortisation/ impairment
At 1 January 2023 9.0 15.4 9.7 9.1 - 43.2
Charge in year - - - 1.3 - 1.3
Impairment in year - - - 5.3 - 5.3
Disposals - - - (0.1) - (0.1)
At 31 December 2023 9.0 15.4 9.7 15.6 - 49.7
At 1 January 2024 9.0 15.4 9.7 15.6 - 49.7
Charge in period - - - 0.1 - 0.1
At 30 June 2024 9.0 15.4 9.7 15.7 - 49.8
Net book value
At 30 June 2024 45.1 - - 0.5 2.7 48.3
At 31 December 2023 45.1 - - 0.6 - 45.7
*Assets under development relate to the investment in a new HR system.
Goodwill has been allocated to the applicable cash generating units of the
Transportation segment (£15.5m (H1 23: £15.5m)) and the Natural Resources
segment (£29.6m (H1 23: £29.6m)).
The Group reviews the value of goodwill and in the absence of any identified
triggering events, tests are based on internal value in use calculations of
the cash generating unit (CGU). The key assumptions for these calculations are
operating margins, discount rates and growth rates.
At 30 June 2024, the Group carried out a review of potential goodwill
impairment indicators or triggers in order to determine if a full impairment
review is required. No triggers were identified. As such, a full impairment
review of each CGU will be carried out at 31 December 2024.
10. PROPERTY, PLANT AND EQUIPMENT
Right-of-use assets
Plant & equipment Assets under construction* Land & buildings Vehicles, plant & equipment Total
£m £m £m £m £m
At 31 December 2023
Cost 15.0 - 19.5 32.7 67.2
Accumulated depreciation and impairment (14.6) - (9.8) (16.0) (40.4)
Net book value 0.4 - 9.7 16.7 26.8
At 30 June 2024
Cost
At 1 January 2024 15.0 - 19.5 32.7 67.2
Additions - 1.8 3.7 4.4 9.9
Disposals - - (4.1) (6.3) (10.4)
At 30 June 2024 15.0 1.8 19.1 30.8 66.7
Accumulated depreciation
and impairment
At 1 January 2024 14.6 - 9.8 16.0 40.4
Charge in period 0.1 - 1.4 4.3 5.8
Disposals - - (2.2) (4.1) (6.3)
At 30 June 2024 14.7 - 9.0 16.2 39.9
Net book value
At 30 June 2024 0.3 1.8 10.1 14.6 26.8
*Assets under construction relate to leasehold improvements under way at the
new London head office.
11. CASH AND CASH EQUIVALENTS
Cash and cash equivalents are analysed below and include the Group's share of
cash held by joint operations of £69.8m (FY 23: £59.2m).
30 June 2024 31 December 2023
£m £m
Cash and cash equivalents 166.0 164.4
Net cash 166.0 164.4
12. PENSIONS
The Group operates a defined benefit pension scheme in the UK; contributions
are paid by subsidiary undertakings. There are also two defined contribution
pension schemes in place in the UK and contributions are made both by
subsidiary undertakings and employees. The total pension charge in the income
statement is defined benefit scheme net income of £0.4m, and defined
contribution scheme operating costs of £6.1m (H1 23: defined benefit scheme
net income of £0.2m, and defined contribution scheme operating costs of
£6.1m).
Defined benefit scheme
The defined benefit scheme was closed to new members on 31 May 2005 and from 1
April 2006 future benefits were calculated on a Career Average Revalued
Earnings basis. The scheme was closed to future accrual of benefits to members
on 30 September 2009. A full actuarial valuation of the scheme was carried out
as at 31 March 2022 and this was updated to 30 June 2024 by a qualified
independent actuary. At 30 June 2024, there were 2,886 retirees and 2,601
deferred members (2023: 2,885 retirees and 2,412 deferred members). The
weighted average duration of the obligations is 11.4 years (2023: 11.9 years).
At 30 June At 31 December At 31 December
2024 2023 2022
£m £m £m
Present value of defined benefit obligations (522.4) (542.6) (527.1)
Fair value of scheme assets 577.5 596.1 587.3
Recognised asset for defined benefit obligations 55.1 53.5 60.2
Movements in present value of defined benefit obligations
At 30 June At 31 December
2024 2023
£m £m
At 1 January 542.6 527.1
Interest cost 12.7 25.5
Remeasurements - demographic assumptions 1.4 (1.0)
Remeasurements - financial assumptions (22.3) 14.8
Remeasurements - experience adjustments 4.1 10.5
Benefits paid (16.1) (34.3)
At end of period 522.4 542.6
Movements in fair value of scheme assets
At 30 June At 31 December
2024 2023
£m £m
At 1 January 596.1 587.3
Interest income 14.0 28.7
Remeasurements - return on assets (18.1) 6.5
Contributions by employer 1.7 8.1
Administrative expenses (0.1) (0.2)
Benefits paid (16.1) (34.3)
At end of period 577.5 596.1
Expense recognised in the income statement
H1 24 H1 23
£m £m
Administrative expenses paid by the pension scheme (0.1) (0.1)
Administrative expenses paid directly by the Group (0.8) (1.3)
Interest income on the net assets of the defined benefit pension scheme 1.3 1.6
0.4 0.2
Fair value of scheme assets
At 30 June At 31 December
2024 2023
£m £m
Global equities 95.3 99.5
Multi-asset growth funds 46.9 65.9
Multi-credit fund 85.1 96.6
LDI plus collateral 330.6 323.8
Cash 19.6 10.3
577.5 596.1
Principal actuarial assumption (expressed as weighted averages)
At 30 June At 31 December
2024 2023
% %
Discount rate 5.15 4.75
Future pension increases 2.95 2.90
Inflation assumption 3.10 3.05
Weighted average life expectancies from age 65 as per mortality tables used to
determine benefits at 30 June 2024 and 31 December 2023 are:
At 30 June 2024 At 31 December 2023
Male Female Male Female
(years) (years) (years) (years)
Currently aged 65 22.0 23.9 22.0 23.8
Non-retirees currently aged 45 23.0 25.2 22.9 25.1
In accordance with the pension regulations, a triennial actuarial review of
the Costain defined benefit pension scheme was carried out as at 31 March
2022. In June 2023, the valuation and updated deficit recovery plan were
agreed with the Scheme Trustee resulting in cash contributions of £3.3m for
each year commencing 1 July 2023 (increasing annually with inflation) until
the deficit is cleared, and an additional contribution so that the total
deficit contributions match the total dividend amount paid by the Company each
year. As part of the agreement, the Scheme funding position is assessed each
31 March and, if the funding level (on a Technical Provisions basis) is more
than 101%, contributions will stop for the following 1 July to 30 June. If the
funding level falls below 101% at the following 31 March, contributions will
resume for the next year starting 1 July to 30 June at the agreed new level.
An assessment of the Scheme funding position was carried out on the 31 March
2024 position, and as the funding level (on a Technical Provisions basis) was
more than 101%, contributions will stop from 1 July 2024 to 30 June 2025.
These contributions would have amounted to £3.4m for the period, should the
Scheme funding level have been less than 101%.
In addition to contributions being stopped for a year, as the funding level is
above 101%, "dividend parity" will be suspended for a year. Under the dividend
parity arrangement, an additional matching contribution (the excess of the
total dividend above the Scheme contribution) is paid to the Costain Pension
Scheme, should the total of the interim and final dividends for a financial
year paid to the shareholders of Costain be greater than the contributions
paid into the Scheme in the previous Scheme financial year, which runs from 1
April to 31 March.
Any surplus of deficit contributions to the Costain Pension Scheme would be
recoverable by way of a refund, as the Group has the unconditional right to
any surplus once all the obligations of the Scheme have been settled.
Accordingly, the Group does not expect to have to make provision for
additional contributions arising from this agreement in future financial
statements.
Defined contribution schemes
Two defined contribution pensions are operated. The total expense relating to
these plans was £6.1m (H1 23: £6.1m).
13. SHARE CAPITAL
H1 24 H1 23
Number (millions) Nominal value £m Number (millions) Nominal value £m
Issued share capital
Shares in issue at beginning of period - ordinary shares of 50p each, fully 276.7 138.3 275.1 137.5
paid
Issued in year 1.8 0.9 1.6 0.8
Reduction in nominal value (transfer to capital redemption reserve) - (136.4) - -
Shares in issue at end of period - ordinary shares of 1p each, fully paid 278.5 2.8 276.7 138.3
The 2021 LTIP vested in the half year and 1,630,000 shares were issued in
April 2024.
A total of 117,144 shares were issued under the Scrip Dividend Scheme during
H1 2024.
On 17 May 2024, the Company reduced the nominal value of its 278,348,885
ordinary shares in issue at that date from £0.50 to £0.01. The reduction was
completed by subdividing each £0.50 ordinary share in issue into one ordinary
share of £0.01 and one deferred share of £0.49. All deferred shares were
then bought back for total aggregate consideration of £0.01 and cancelled on
20 May 2024. The Company's issued ordinary share capital remained unchanged
immediately after the transaction and each shareholder's proportionate
interest in the share capital of the Company remained unchanged. Aside from
the change in nominal value, the rights attaching to the ordinary shares
(including voting and dividend rights and rights on a return of capital)
remained unchanged.
The Company's issued share capital comprised 278,466,029 ordinary shares of
£0.01 each as at 30 June 2024.
All shares rank pari passu regarding entitlement to capital and dividends.
14. EVENTS AFTER THE REPORTING DATE
Dividend
As reported above, an interim dividend of 0.4p per share has been declared for
the six months ended 30 June 2024.
Share buyback
As reported above, a £10m share buyback has been announced on 21 August
2024.
Independent review report to Costain Group PLC
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Costain Group PLC's condensed consolidated interim financial
statements (the "interim financial statements") in the Results for the six
months ended 30 June 2024 ("H1 24") of Costain Group PLC for the 6 month
period ended 30 June 2024 (the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
· the Group Balance Sheet as at 30 June 2024;
· the Group Income Statement and the Group Statement of Comprehensive
Income and Expense for the period then ended;
· the Group Cash Flow Statement for the period then ended;
· the Group Statement of Changes in Equity for the period then ended;
and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the Results for the six months
ended 30 June 2024 ("H1 24") of Costain Group PLC have been prepared in
accordance with UK adopted International Accounting Standard 34, 'Interim
Financial Reporting' and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the Results for the six months
ended 30 June 2024 ("H1 24") and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the interim
financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Results for the six months ended 30 June 2024 ("H1 24"), including the
interim financial statements, is the responsibility of, and has been approved
by the directors. The directors are responsible for preparing the Results for
the six months ended 30 June 2024 ("H1 24") in accordance with the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority. In preparing the Results for the six months ended 30 June
2024 ("H1 24"), including the interim financial statements, the directors are
responsible for assessing the group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the group or to cease operations, or have no realistic alternative
but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Results for the six months ended 30 June 2024 ("H1 24")
based on our review. Our conclusion, including our Conclusions relating to
going concern, is based on procedures that are less extensive than audit
procedures, as described in the Basis for conclusion paragraph of this report.
This report, including the conclusion, has been prepared for and only for the
company for the purpose of complying with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority and for no other purpose. We do not, in giving this conclusion,
accept or assume responsibility for any other purpose or to any other person
to whom this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
20 August 2024
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